Related papers: The Naive Extrapolation Hypothesis and the Rosy-Gl…
We examine how large language models (LLMs) interpret historical stock returns and compare their forecasts with estimates from a crowd-sourced platform for ranking stocks. While stock returns exhibit short-term reversals, LLM forecasts…
It has been widely observed that capitalization-weighted indexes can be beaten by surprisingly simple, systematic investment strategies. Indeed, in the U.S. stock market, equal-weighted portfolios, random-weighted portfolios, and other…
We empirically analyze a large sample of firm sales growth expectations. We find that the relationship between forecast errors and lagged revision is non-linear. Forecasters underreact to typical (positive or negative) news about future…
We study the accuracy of job seekers' wage expectations by comparing subjective beliefs to objective benchmarks using linked administrative and survey data. Our findings show that especially job seekers with low objective earnings potential…
This paper develops a model of reference-dependent assessment of subjective beliefs in which loss-averse people optimally choose the expectation as the reference point to balance the current felicity from the optimistic anticipation and the…
This paper describes the practical application of causal extrapolation of sequences for the purpose of forecasting. The methods and proofs have been applied to simulations to measure the range which data can be accurately extrapolated. Real…
We study the statistics of earning forecasts of US, EU, UK and JP stocks during the period 1987-2004. We confirm, on this large data set, that financial analysts are on average over-optimistic and show a pronounced herding behavior. These…
We hypothesize that portfolio sorts based on the V/P ratio generate excess returns and consist of companies that are undervalued for prolonged periods. Results, for the US market show that high V/P portfolios outperform low V/P portfolios…
This paper defines theoretical lower bounds of uncertainty of observations of macroeconomic variables that depend on statistical moments and correlations of random values and volumes of market trades. Any econometric assessments of…
A rich theoretical and empirical literature investigated the link between export diversification and firm performance. Prior theoretical works hinted at the key role of capability accumulation in shaping production activities and…
We study the problem of optimal long term portfolio selection with a view to beat a benchmark. Two kinds of objectives are considered. One concerns the probability of outperforming the benchmark and seeks either to minimise the decay rate…
Large Language Models (LLMs) demonstrate partial forecasting competence across social, political, and economic events. Yet, their predictive ability varies sharply with domain structure and prompt framing. We investigate how forecasting…
We propose a novel explanation for classic international macro puzzles regarding capital flows and portfolio investment, which builds on modern macro-finance models of experience-based belief formation. Individual experiences of past…
Encouraged by decision makers' appetite for future information on topics ranging from elections to pandemics, and enabled by the explosion of data and computational methods, model based forecasts have garnered increasing influence on a…
We examine how uncertain veracity of external news influences investor beliefs, market prices and corporate disclosures. Despite assuming independence between the news' veracity and the firm's endowment with private information, we find…
Among many efforts to facilitate timely access to safe and effective medicines to children, increased attention has been given to extrapolation. Loosely, it is the leveraging of conclusions or available data from adults or older age groups…
Practitioners building classifiers often start with a smaller pilot dataset and plan to grow to larger data in the near future. Such projects need a toolkit for extrapolating how much classifier accuracy may improve from a 2x, 10x, or 50x…
In public discussions of the quality of forecasts, attention typically focuses on the predictive performance in cases of extreme events. However, the restriction of conventional forecast evaluation methods to subsets of extreme observations…
A new model that combines economic growth rate fluctuations at the microscopic and macroscopic level is presented. At the microscopic level, firms are growing at different rates while also being exposed to idiosyncratic shocks at the firm…
We investigate the trading behavior of a large set of single investors trading the highly liquid Nokia stock over the period 2003-2008 with the aim of determining the relative role of endogenous and exogenous factors that may affect their…